Most of the news outlets are reporting the inevitability of a recession. 
Construction and sale of new homes is down. As a result, prices of new homes and those recently added to the market will fall. People will not be getting top dollar on an investment that has always appreciated (if artificially in the past 6 years).
Mortgages for first time home-buyers are more difficult to get, limiting the number of new entrants into homeownership. Consumers are also spending less. The Boston Globe kicked off the concern last Thursday with this analysis, based on the lede of an Arlington, Massachusetts couple who are forced to limit their spending habits:
“Consumer spending, which accounts for about 70 percent of US economic activity, is critical to the overall health of the economy. For years, robust spending on everything from homes to clothes kept the economy afloat. But Americans are paying heavily for their habits, saddled with record amounts of debt”, writes Jenn Abelson, merely 10 days into the New Year.
Worse for consumers, gasoline prices seem to be doing nothing but going up, and thus far, there hasn’t been convincing evidence to the contrary. The highest price as of today being $3.70 for a gallon of regular in California (according to the unscientific, but no less shocking user-reports posted on californiagasprices.com)
Trying to stimulate the economy, the Federal Reserve is making it cheaper to borrow money. Yet the jury is still out on when any reduction of interest rates will actually result in a positive effect on the economy.
All of these conditions give several important advantages to any Democrat in this race. The economy is notoriously a strength for Republicans. Now, with the top democratic candidates turning their focus to the economic troubles average Americans are facing, the Democratic nominee will have another bullet in the chamber when aiming at Republican failures of the last 8 years.
For one, talk of recession disproves the success of President Bush’s much touted tax cuts for the richest Americans. Secondly, the nominee can claim a systemic failure in the overall economic policy championed by Republicans. When George Bush and his GOP sycophants were looking overseas at Iraq, average Americans were suffering back home. Lack of investment in domestic programs have fallen prey to an imprudent war with no conceivable end.
Thus the 2008 general election could be as convincingly up for grabs as the 2000 election. Democrats were in a position of strength in relation to the economy that year – with nearly a decade of peace to back up the safe progress of the nation. With a Republican in the White House with sub-40’s for his approval ratings, pinning the pains of the present on the mistakes of the past will be far more effective than it was in the ill-fated 2004 election.
If a recession hits, Republicans (as they typically are) will be looked upon as the party better equipped to rescue America. Hillary Clinton, Barack Obama and John Edwards are already taking lighting this torch and starting to blame the GOP for their anti-middle class tax cuts. Clinton and Obama now have plans for multi-billion dollar bailouts for struggling Americans. If they can successfully frame their solutions as the right stimulus for the ailing economy, while also attributing years of domestic neglect to the GOP, we might see a 4 or 5 point Democratic victory this November.
